cont'd - KNM Steel Sdn Bhd

62KNM GROUP BERHAD I Annual Report 2012Notes to the Financial Statements (cont’d)2. Significant accounting policies (Cont’d)(c)Financial instruments (cont’d)(v)Hedge accountingCash flow hedgeA cash flow hedge is a hedge of the exposure to variability in cash flows that is attributableto a particular risk associated with a recognised asset or liability or a highly probable forecasttransaction and could affect the profit or loss. In a cash flow hedge, the portion of the gain orloss on the hedging instrument that is determined to be an effective hedge is recognised in othercomprehensive income and the ineffective portion is recognised in profit or loss.Subsequently, the cumulative gain or loss recognised in other comprehensive income is reclassifiedfrom equity into profit or loss in the same period or periods during which the hedged forecast cashflows affect profit or loss. If the hedge item is a non-financial asset or liability, the associated gain orloss recognised in other comprehensive income is removed from equity and included in the initialamount of the asset or liability. However, loss recognised in other comprehensive income that willnot be recovered in one or more future periods is reclassified from equity into profit or loss.Cash flow hedge accounting is discontinued prospectively when the hedging instrument expiresor is sold, terminated or exercised, the hedge is no longer highly effective, the forecast transactionis no longer expected to occur or the hedge designation is revoked. If the hedge is for a forecasttransaction, the cumulative gain or loss on the hedging instrument remains in other comprehensiveincome until the forecast transaction occurs. When the forecast transaction is no longer expectedto occur, any related cumulative gain or loss recognised in other comprehensive income on thehedging instrument is reclassified from equity into profit or loss.(vi)DerecognitionA financial asset or part of it is derecognised when, and only when the contractual rights to thecash flows from the financial asset expire or the financial asset is transferred to another partywithout retaining control or substantially all risks and rewards of the asset. On derecognition ofa financial asset, the difference between the carrying amount and the sum of the considerationreceived (including any new asset obtained less any new liability assumed) and any cumulativegain or loss that had been recognised in equity is recognised in the profit or loss.A financial liability or a part of it is derecognised when, and only when, the obligation specifiedin the contract is discharged or cancelled or expires. On derecognition of a financial liability, thedifference between the carrying amount of the financial liability extinguished or transferred toanother party and the consideration paid, including any non-cash assets transferred or liabilitiesassumed, is recognised in the profit or loss.(d)Property, plant and equipment(i)Recognition and measurementFreehold lands and capital work-in-progress are stated at cost/valuation less any accumulatedimpairment losses. All other items of property, plant and equipment are stated at cost/valuationless accumulated depreciation and any accumulated impairment losses.The Group revalues its freehold lands and buildings every 5 years and at shorter intervals wheneverthe fair value of the revalued assets is expected to differ materially from their carrying value.Additions subsequent to their revaluation are stated in the financial statements at cost until thenext revaluation exercise.